The Revised Corporation Code

of the Philippines
Republic Act No. 11232, February 23, 2019
 Section 2. Corporation Defined
A corporation is an artificial being created by
operation of law, having the right of succession
and powers, attributes, and properties expressly
authorized by law or incidental to its existence.
Characteristics of a Corporation
1. IT IS AN ARTIFICIAL BEING.
It is considered as a separate and distinct
person.
PIERCING THE VEIL OF CORPORATE FICTION OR
ALTER EGO DOCTRINE
It is a principle wherein the separate and distinct
personality of a corporation will be disregarded
if its members uses such personality of the
corporation, to perpetuate deception or to
justify a wrong or protect fraud.
2. CREATED BY OPERATION OF LAW.
A law breath life to a corporation.
a. Corporations created under this law
are referred to as PRIVATE
CORPORATION;
b. Corporations created under a specific
law, other than RCC are PUBLIC
CORPORATION or Government Owned or
Controlled Corporations (GOCC)
What is a GOCC?

It refers to a corporation whether it be stock or

non-stock, vested with functions relating to
public need whether governmental or
proprietary in nature and owned by the
government directly or through its
instrumentalities either wholly or majority of its
stocks.
3. IT HAS THE RIGHT OF SUCCESSION.
Corporations continue to exists regardless of
change in its members or ownership.
4. IT HAS POWERS, ATTRIBUTES, AND
PROPERTIES EXPRESSLY AUTHORIZED BY LAW OR
INCIDENTAL TO ITS EXISTENCE.
Section 2.

Corporation Defined. - A corporation is an

artificial being created by operation of law,
having the right of succession and the powers,
attributes, and properties expressly authorized
by law or incidental to its existence.
Corporation as an artificial being

A corporation is a legal or juridical person with a

personality separate and apart from its
stockholders or members
Attributes of separate and distinct
personality
1. Liability for debts/ownership of credit – As a rule,
corporation is not liable for the debts of its
stockholders, likewise, the later is not liable for the
debts of the corporation;
2. Right to bring actions – It may sue and be sued in its
own name;
3. Right to own properties – Properties may be
conveyed by or to the corporation in its own name;
4. Liability for contracts – All contracts entered into its
name by the regular appointed officers and agents
are the contracts of the corporation and not those of
the stockholders or members;
PARTNERSHIP vs. CORPORATION
PARTNERSHIP
Manner of Creation Generally, by mere
agreement of the parties
Number of Incorporators Minimum of 2
incorporators
Commencement of From the execution of the
Juridical Personality Contract of Partnership
Powers Anything provided for in
the contract and or
authorized by the partners,
provided it is not contrary
to law, morals, etc.
CORPORATION
By operation of law
Except One Person
Corporation (OPC),
Maximum of 15
From the date of ISSUANCE
of CERTIFICATE OF
INCORPORATION by the
SEC
May only exercise those
powers impliedly or
expressly granted by law
and those incidental to its
existence
Cont..
Management
Right of Succession
Extent of Liability
Transferability of Interest
PARTNERSHIP CORPORATION
Unless agreed upon, all of It is vested to the Board of
the partners are managers Directors or Members, as
of the partnership the case may be
N/A Has right of succession
Generally, extends up to Extends only to the
their personal and separate stockholder’s share
properties
Interest may not be Shares may be transferred
transferred without the without prior consent from
consent of other partners, co-stockholders
at least to make the
assignee a partner
Similarities between PARTNERSHIP and
CORPORATION
PARTNERSHIP CORPORATION

Separate juridical Check Check

personality
Acts through its agents Check Check
Composed of individuals Check Check
Distributes profit Check Check
Taxable Check Check
Section 3

Classes of Corporations. - Corporations formed

or organized under this Code may be stock or
non-stock corporations. Stock corporations are
those which have capital stock divided into
shares and are authorized to distribute to the
holders of such shares, dividends, or allotments
of the surplus profits on the basis of the shares
held. All other corporations are no-nstock
corporations.
Other classes of corporation
As to composition
1. Corporation aggregate – More than one member or incorporator
2. Corporation Sole – a corporation consisting of only one member for the
purpose of administering and managing affairs of any religious
denomination, sect or church.
As to purpose
1. Public Corporation – A corporation organized for the government of a
portion of the state for the general welfare
2. Private Corporation – Formed for some private purpose, benefit or end.
a. GOCC – those owned or controlled by the government or any of its
instrumentality.
b. Quasi-Public Corporation – Accepted from the State the grant of a
franchise for the rendition or performance of some public duties or service.
As to laws of incorporation
1. Domestic – incorporated under Philippine Laws
2. Foreign – incorporated under laws, other than Philippine laws
 As to religious purpose
1. Ecclesiastical – organized for religious purpose
2. Lay Corporation – organized other than for religious purposes
a. Eleemosynary Corporation – Established for charitable purposes
b. Civil Corporation – Established for Business of profit

As to their legal right to corporate existence

1. De Jure – Existing in fact and in law
2. De Facto – Existing in fact but not in law
3. Corporation by Estoppel – Persons who assumes to act as a corporation

As to whether they are open to the public or not

1. Close – Limited to selected persons or member of a family
2. Open – Open to any person

As to their relation to another corporation

1. Parent or Holding Corporation – a corporation that holds stocks in another
corporation for purposes of control
2. Subsidiary – A corporation more than 50% of the voting stock of which is
controlled directly or indirectly by another corporation.
Section 4

Corporations Created by Special Laws or

Charters. - Corporations created by special laws
or charters shall be governed primarily by the
provisions of the special law or charter creating
them or applicable to them, supplemented by
the provisions of this Code, insofar as they are
applicable.
Section 5.

Corporators and Incorporators, Stockholders and

Members. - Corporators are those who compose
a corporation, whether as stockholders or
shareholders in a stock corporation or as a
members in a non-stock corporations.
Incorporators are those stockholders or
members mentioned in the articles of
incorporation as originally forming and
composing the corporation and who are
signatories thereof.
INCORPORATOR vs. CORPORATOR

INCORPORATOR CORPORATOR
Those stockholders or members Those stockholders or members who
mentioned in the AOI as originally forming comprises the corporation
and composing the corporation and who
are signatories thereon
Signatories to the AOI Not necessarily signatories thereon
Conveyance of share does not affect Upon conveyance of share, ceases to be a
status as incorporator corporator
Not more than 15 No restriction
Other person in the formation of a corporation

Stockholders – Owners of shares of stock in a stock

corporation
Members – Corporators in a non-stock corporation
Board of Directors – governing body in a stock
corporation
Board of Trustees - governing body in a non stock
corporation
Corporate Officers – President, Secretary, Treasurer
and other officers under the by-laws
Promoters – those who bring about or cause to
bring about the formation and organization of a
corporation by bringing together the incorporators
or persons interested in the enterprise and setting in
motion the machinery which leads to the
incorporation of the corporation itself.
Subscribers – are those who have agreed to take
and pay the original, unissued shares of a
corporation formed or to be formed.

They are not shareholders until their subscriptions

are accepted by the corporation.
Section 6.
(1st Par.) Classification of Shares. - The classification of shares,
their corresponding rights, privileges, restrictions, and their
stated par value, if any, must be indicated in the articles of
incorporations. Each share shall be equal in all respects to every
other share, except as otherwise provided in the articles of
incorporation. Each share shall be equal in all respects to every
other share, except as otherwise provided in the articles of
incorporation and in the certificate of stock.

(2nd Par.) The share stock corporations may be divided into

classes or series of shares, or both. No share may be deprived of
voting rights except those classified and issued as "preferred" or
"redeemable" shares, unless otherwise provided in this
Code: Provided, That there shall be a class or series of shares
with complete voting rights.
(3rd Par.) Holders of non-voting shares shall nevertheless be
entitled to vote on the following matters;
(a) Amendment of the articles of incorporation;
(b) Adoption and amendment of bylaws;
(c) Sale, lease, exchange, mortgage, pledge, or other disposition
of all or substantially all of the corporate property;
(d) Incurring, creating, or increasing bonded indebtedness;
(e) Increase or decrease of authorized capital stock;
(f) Merger or consolidation of the corporation with another
corporation or other corporations;
(g) Investment of corporate funds in another corporation or
business in accordance with this Code; and
(h) Dissolution of the corporation.
(4th Par.) Except as provided in the immediately
preceding paragraph, the vote required under this Code
to approve a particular corporate act shall be deemed to
refer only to stocks with voting rights.
(5th Par.) The shares or series of shares may or may not
have a par value: Provided, That banks, trust, insurance,
and preneed companies, public utilities, building and
loan associations, and other corporations authorized to
obtain or access funds from the public whether publicly
listed or not, shall not be permitted to issue no-par value
shares of stock.
(6th Par.) Preferred shares of stock issued by a corporation may be given
preference in the distribution of dividends and in the distribution of corporate
assets in case of liquidation, or such other preferences: Provided, That preferred
shares of stock may be issued only with a stated par value. The board of directors,
where authorized in the articles of incorporation, may fix the terms and
conditions of preferred shares of stock or any series thereof: Provided,
further, That such terms and conditions shall be effective upon filing of a
certificate thereof with the Securities and Exchange Commission, hereinafter
referred to as the "Commission".

(7th Par.) Shares of capital stock issued without par value shall be deemed fully
paid and non-assessable and the holder of such shares shall not be liable to the
corporation or to its creditors in respect thereto: Provided, That no-par value
shares must be issued for a consideration of at least Five pesos (₱5.00) per
share: Provided, further, That the entire consideration received by the corporation
for its no-par value shares shall be treated as capital and shall not be available for
distribution as dividends.

(8th Par.) A corporation may further classify its shares for the purpose of ensuring
compliance with constitutional or legal requirements.
1st Par. – Doctrine of Equality of Shares.
Each share (Common share/stock) shall be equal in
all respects (rights and liabilities) to every other
share except as otherwise provided in the articles of
incorporation and stated in the certificate of stock.

All shares belonging in the same classification must

be equal as to rights, privileges and liabilities.
Who may classify shares?

1st. Incorporators
2nd. Board of Directors and Stockholders (by way
of amendment) by majority vote of BOD and
consent of stockholders representing 2/3 of the
outstanding capital stocks.
2nd Par.

All shares must be classified and shall have complete

voting rights.
(1 share = 1 vote)

EXCEPTION preferred or redeemable shares shall

have no voting rights, including any other class of
shares which are considered as delinquent share.

Only those subscribed and issued share may be

voted.
How about non-stock corporations?

Membership thereto is deemed attached to a

voting right.

General Rule, every member is entitled to a

single vote. (1 member = 1 vote)
3rd Par.
Preferred, redeemable shares and other non-voting
shares may vote on the following matters enumerated
under 3rd par of Sec. 6.
(A I MID-SLEMPO)
2 2

Preferred Stock – are shares which enjoys preference on

some matters than that of common stock in exchange of
voting rights.

Redeemable stocks – Shares which may be purchased

back by the corporation after the expiration of an agreed
period .
4th par.

All matter other than A I MID-SLEMPO which

2 2

requires vote, shall pertain to all shares with

voting rights.
5th Par.

Shares may or may not have par-value, except

corporations engaged in BANKING, TRUST,
INSURANCE, PUBLIC UTILITIES, BUILDING AND
LOAN AND ALL OTHER AUTHORIZED TO OBTAIN
OR ACCESS FUNDS FROM THE PUBLIC which may
not issue shares with no par value.
Par-value

Series or classification of shares with a FIXED

value in the AOI and the certificate book.
6th Par

Preference or terms and conditions of Preferred

shares must be indicated in the AOI. Must
always be with par value and shall be effective
upon FILLING of certificate of incorporation with
SEC.
7th Par.

Upon issuance of No-par value share, it is

deemed to have been fully paid.

No par value shares is not subject to distribution

as dividend and is treated as capital.

The minimum value of No-par value shares is

Five Pesos.
Section 7.
Founders' Shares. - Founders' shares may be given
certain rights and privileges not enjoyed by the owners of
other stock. Where the exclusive right to vote and be
voted for in the election of directors is granted, it must
be for a limited period not to exceed five (5) years from
the date of incorporation: Provided, That such exclusive
right shall not be allowed if its exercise will violate
Commonwealth Act No. 108, otherwise known as the
"Anti-Dummy Law"; Republic Act No. 7042, otherwise
known as the "Foreign Investments Act of 1991"; and
otherwise known as "Foreign Investments Act of 1991";
and other pertinent laws.
Section 8.
Redeemable Shares. - Redeemable shares may be issued
by the corporation when expressly provided in the
articles of incorporation. They are shares which may be
purchased by the corporation. They are shares which
may be purchased by the corporation from the holders of
such shares upon the expiration of a fixed period,
regardless of the existence of unrestricted retained
earnings in the books of the corporation, and upon such
other terms and conditions stated in the articles of
incorporation and the certificate of stock representing
the shares, subject to rules and regulations issued by the
Commission.
Unrestricted Retained Earnings
Accumulated income after dividends have been
distributed.

In other words, Surplus.

2 kinds of RS
1. Mandatory or Compulsory and
2. Optional

URE may not be further re-issued, unless otherwise

provided in the AOI.
Section 9.

Treasury Shares. - Treasury shares are shares of

stock which have been issued and fully paid for,
but subsequently reacquired by the issuing
corporation through purchase, redemption,
donation, or some other lawful means. Such
shares may again be disposed of for a
reasonable price fixed by the board of directors.
Watered Stocks – Stocks issued for a
consideration less than the par or issued value
thereon.

Watered stocks refers only to original issue of

shares but not to a subsequent transfer of such
shares by the corporation.
PEE BREAK,YEY!
INCORPORATION AND
ORGANIZATION OF PRIVATE
CORPORATIONS
Section 10.
Number and Qualifications of Incorporators. - Any person,
partnership, association or corporation, singly or jointly with others
but not more than fifteen (15) in number, may organize a corporation
for any lawful purpose or purposes: Provided, That natural persons
who are licensed to practice a profession, and partnerships or
associations organized for the purpose of practicing a profession,
shall not be allowed to organize as a corporation unless otherwise
provided under special laws. Incorporators who are natural persons
must be of legal age.

Each incorporator of a stock corporation must own or be a subscriber

to at least one (1) share of the capital stock.

A corporation with a single stockholder is considered a One Person

Corporation as described in Title XIII, Chapter III of this Code.
Qualifications of Incorporators
AGE SEC OTHER SIGNATURE IN THE SUBSCRIPTION
REGISTRATI DOCUMENTARY AOI and BL
ON REQUIREMENT
Natural Must be N/A N/A Must sign Must own or
Person of legal subscribed to at
age least 1 share
Partnership N/A SEC Partner’s Affidavit Any partner duly Must own or
Registered executed by ALL authorized subscribed to at
partners, authorizing least 1 share
the partnership to
invest in the
corporation
Domestic N/A SEC Board Reso. Approved Any duly authorized Must own or
Corporation Registered by Majority of the BOD signatory subscribed to at
and ratified by 2/3 of least 1 share
the outstanding capital
stock or members,
allowing the
corporation to invest
Foreign N/A N/A Any document with Any duly authorized Must own or
Corporation apostille, allowing the signatory subscribed to at
FC to invest least 1 share
ONE PERSON CORPORATION

OPC is a corporation with a single stockholder.

ONLY NATURAL PERSON, TRUST or ESTATE may
form OPC.
HOW TO INCORPORATE

1. Draft AOI with Treasurer’s Affidavit in

accordance with Sec. 13 and 14.
2. Special corporations such as Schools, Banks,
Insurance Companies must secure favorable
recommendation from appropriate
government agency.
3. Filling with SEC
4. Issuance of Certificate of Incorporation.
Section 11.
(1st Par.) Corporate Term. - A corporation shall have perpetual existence unless its articles of
incorporation provides otherwise.

(2nd Par) Corporations with certificates of incorporation issued prior to the effectivity of this Code and
which continue to exist shall have perpetual existence, unless the corporation, upon a vote of its
stockholders representing a majority of its articles of incorporation: Provided, That any change in the
corporate right of dissenting stockholders in accordance with the provisions of this Code.

(3rd Par.) A corporate term for a specific period may be extended or shortened by amending the articles
of incorporation: Provided, That no extension may be made earlier than three (3) years prior to the
original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may
be determined by the Commission: Provided, further, That such extension of the corporate term shall
take effect only on the day following the original or subsequent expiry date(s).

(4th Par) A corporation whose term has expired may apply for revival of its corporate existence, together
with all the rights and privileges under its certificate of incorporation and subject to all of its duties,
debts and liabilities existing prior to its revival. Upon approval by the Commission, the corporation shall
be deemed revived and a certificate of revival of corporate existence shall be issued, giving it perpetual
existence, unless its application for revival provides otherwise.

(5th Par) No application for revival of certificate of incorporation of banks, banking and quasi-banking
institutions, preneed, insurance and trust companies, non-stock savings and loan associations (NSSLAs),
pawnshops, corporations engaged in money service business, and other financial intermediaries shall be
approved by the Commission unless accompanied by a favorable recommendation of the appropriate
government agency.
TERM OF EXISTENCE

Under 1st Par. - Corporation shall have perpetual

existence, unless otherwise AOI provides for a
specific period.
2nd Par
Under the old code, the term of existence of a
corporation is max 50 years.

Par 2 provides options to those corporations

incorporated under the old code:
1. To have a perpetual existence (under the new
code), or
2. To retain the 50yr term or other specified term,
however requires the majority vote of its
outstanding capital stock and that appraisal right
shall not be deprived to its stock holders.
Appraisal Right

It refers to the right of any stockholder of a

corporation to dissent and demand payment of
the fair value of his or her shares in the
corporation.
3rd Par.
Corporations with a fixed term of existence provided in
its AOI, may extend or shorten such period by amending
its AOI.

Period when to extend.

Not earlier than 3 years from the specified period, unless
for valid and justifiable reason.

When shall extension take effect?

On the first day after the expiration of the specified term.
4th Par.
How about those corporation whose term of existence
expired?

Such corporation may apply for revival before the SEC.

Upon approval of the SEC, the Corporation is revived and
comes to existence.

Term of Existence of a revived corpo.?

-Perpetual or for a specified period as the case may be.
Proof of revival?

- Issuance of Certificate of Revival of Corporate Existence.

Required vote for an Application for Revival of
Corporate Existence.

Majority vote of BOD or BOT and Majority vote

of outstanding capital stock or members.
5th Par.
In addition for application for revival of
BB-POPIN, it shall provide for a positive
recommendation from appropriate government
agency.

What is BB-POPIN?
Bank, Banking and quasi-banking institution,
Preneed companies, Other financial intermediaries,
Pawnshop, Insurance companies, Non-stock savings
and loan associations.
Section 12.

Minimum Capital Stock Not Required of Stock

Corporations. - Stock corporations shall not be
required to have minimum capital stock, except
as otherwise specially provided by special law.
Gen. Rule.
No required minimum Capital Stock.

Exception.
If special law so provides.
i.e. Corporations engaged in pawnshop business
requires that at least 70% of its voting capital
stock belongs to Filipino citizen.
Section 15.
Amendment of Articles of Incorporation. - Unless
otherwise prescribed by this Code or by special law, and
for legitimate purposes, any provision or matter stated in
the articles of incorporation may be amended by a
majority vote of the board of directors or trustees and
the vote or written assent of the stockholders
representing at least two-thirds (2/3) of the outstanding
capital stock, without prejudice to the appraisal right of
dissenting stockholders in accordance with the provisions
of this Code. The articles of incorporation of a non-stock
corporation may be amended by the vote or written
assent of majority of the trustees and at least two-thirds
(2/3) of the members.
The original and amended articles together shall contain
all provisions required by law to be set out in the articles
of incorporation. Amendments to the articles shall be
indicated by underscoring the change or changes made,
and a copy thereof duly certified under oath by the
corporate secretary and a majority of the directors or
trustees, with a statement that the amendments have
been duly approved by the required vote of the
stockholders or members, shall be submitted to the
Commission.

The amendments shall take effect upon their approval by

the Commission or from the date of filing with the said
Commission if not acted upon within six (6) months from
the date of filing for a cause not attributable to the
corporation.
AOI may be amended by Majority vote of BOD or BOT and 2/3 of
outstanding capital stock or members. Appraisal right shall be
available.

Limitations in the amendment of AOI:

1. Must not be contrary to RCC or Special law and for a legitimate
purpose;
2. Vote requirement;
3. Must be compliant with sec 13;
4. Corp Sec’s Cert stating that the required vote has been complied
with;
5. Amendment must be approved by SEC
6. For BB-POPIN, positive recommendation is required.
Non compliance with the requirements for
Incorporation or Amendment shall be a ground
for Disapproval of AOI.
-Sec. 16
If the SEC is satisfied with the documentary
requirements submitted for incorporation, it
shall issue Certificate of Incorporation and from
there, Corporate Existence commence.

Corporation will now be granted with juridical

personality.
-Sec. 18
Section 19.

De facto Corporations. - The due incorporation

of any corporation claiming in good faith to be a
corporation under this Code, and its right to
exercise corporate powers, shall not be required
into collaterally in any private suit to which such
corporation may be a party. Such inquiry may be
made by the Solicitor General in a quo
warranto proceeding.
De facto Corporation
It refers to a corporation who attempts in good faith to incorporate
under a valid law, but for some reason, it fails to complete such
incorporation.

It is a corporation who partially have complied with the

requirements under the law for incorporation.

De facto corporation MUST have filed its AOI and was issued with
COI, otherwise, it will NEVER be a DFC.

Significance:
It will have its juridical personality and may exercise corporate
powers.
Section 21.
Effects of Non-Use of Corporate Charter and Continuous In-operation. - If a corporation
does not formally organize and commence its business within five (5) year from the date
of its incorporation, its certificate of incorporation shall be deemed revoked as of the day
following the end of the five (5)-year period.

However, if a corporation has commence its business but subsequently becomes

inoperative for a period of at least five (5) consecutive years, the Commission may, after
due notice and hearing, place the corporation under delinquent status.

A delinquent corporation shall have a period of two (2) years to resume operations and
comply with all requirements that the Commission shall prescribed. Upon the
compliance by the corporation, the Commission shall issue an order lifting the
delinquent status. Failure to comply with the requirements and resume operations
within the period given by the Commission shall cause the revocation of the
corporation's certificate of incorporation.

The Commission shall give reasonable notice to, and coordinate with the appropriate
regulatory agency prior to the suspension or revocation of the certificate of
incorporation of companies under their special regulatory jurisdiction.
Non – Organization and Commencement of
business for a period of 5 consecutive years is a
ground for revocation of AOI.
Acts of Organization

1. Adoption of By-laws and filing the same with

SEC
2. Election of BOD or BOT and officers
3. Any and all other acts necessary to enable
the corporation to transact or begin its
business or accomplishment of its purpose
for under its AOI.
Corporation who commences it business but
subsequently becomes inoperative for a period
of 5 consecutive years, shall be placed on
delinquent status.

Removal of Delinquent status

-Within 2 years from being such, shall resume
operation and comply with the requirements
prescribed by the SEC otherwise AOI will be
revoked.
PEE BREAK,YEY!
BOARD OF DIRECTORS/TRUSTEE
AND OFFICERS
Section 22.
(1st part) The Board of Directors or Trustees of a Corporation;
Qualification and Term. - Unless otherwise provided in this
Code, the board of directors or trustees shall exercise the
corporate powers, conduct all business, and control all
properties of the corporation.

Directors shall be elected for a term of one (1) year from

among the holders of stocks registered in the corporation's
book while trustees shall be elected for a term not exceeding
three (3) years) from among the members of the corporation.
Each director and trustee shall hold office until the successor is
elected and qualified. A director who ceases to own at least
one (1) share of stock or a trustee who ceases to be a member
of the corporation shall cease to be such.
(2nd Part) The board of the following corporations vested with public interest shall have
independent directors constituting at least twenty percent (20%) of such board:
(a) Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as "The
Securities Regulation Code", namely those whose securities are registered with the
Commission, corporations listed with an exchange or with assets of at least Fifty million
pesos (50,000,000.00) and having two hundred (200) or more holders of shares, each holding
at least one hundred (100) shares of a class of its equity shares;
(b) Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service
business, preneed, trust and insurance companies and other financial intermediaries; and
(c) Other corporations engaged in businesses vested with public interest similar to the above,
as may be determined by the Commission, after taking into account relevant factors which
are germane to the objective and purpose of requiring the election of an independent
director, such as the extent of minority ownership, type of financial products or securities
issued or offered to investors, public interest involved in the nature of business operations,
and other analogous factors.

An independent director is a person who apart from shareholdings and fees received from
any business or other relationship which could, or could reasonable be received to materially
interfere with the exercise of independent judgment in carrying out the responsibilities as a
director.

Independent directors must be elected by the shareholders present or entitled to vote in

absentia during the election of directors. Independent directors shall be subject to rules and
regulations governing their qualifications, disqualifications, voting requirements, duration of
term and term limit, maximum number of board membership and other requirements that
the Commission will prescribed to strengthen their independence and align with
international best practices.
1st Part

Term of Office 3 years,

1 year,
subject to
subject to
hold-over
hold-over
period
Board Board period

of of
Must own Qualification
at least 1 Directo Trustee Must be a
share in the member
stocks rs s
Exercises acts of
YES YES
management
BOD and BOT
Governing body of the corporation –
Corporations being an artificial being, acts and
contracts through its BOD and BOT.

They are elected by and among the corporate

stockholders or members their main objective is
to oversee the management and operation of
the corporation.

They exercise corporate power, except those

residual powers vested unto the SH/M.
BUSINESS JUDGMENT RULE

It is a rule wherein the courts will not interfere

to any and business contracts entered into by
the BOD, unless such contract is unconscionable,
and oppressive tantamount to wanton
destruction of the rights of the minority.
DERIVATIVE SUIT

Is a remedy available to the SH in case the BOD

fails or refuses to sue on matters in behalf of the
corporation.
Part 2.

Independent Director – A director not related or

connected with the corporation and is elected
by the SH to act and exercise all of the powers
vested unto regular directors.

BB-POPIN shall have independent directors

constituting at least 20% of the BOD.
Section 23.
Election of Directors or Trustees. - Except when the exclusive right is reserved
for holders of founders' shares under Section 7 of this Code, each stockholder
or member shall have the right to nominate any director or trustee who
possesses all of the qualifications and none of the disqualifications and none
of the disqualifications set forth in this Code.

At all elections of directors or trustees, there must be present, either in

person or through a representative authorized to act by written proxy, the
owners of majority of the outstanding capital stock, or if there be no capital
stock, a majority of the members entitled to vote. When so authorized in the
bylaws or by a majority of the board of directors, the stockholders or
members may also vote through remote communication or in
absentia: Provided, That the right to vote through such modes may be
exercised in corporations vested with public interest, notwithstanding the
absence of a provision in the bylaws of such corporations.

A stockholder or member who participates through remote communication

or in absentia, shall be deemed present for purposes of quorum.
The election must be by ballot if requested by any voting stockholder or
member.
In stock corporations, stockholders entitled to vote shall have the right to vote
the number of shares of stock standing in their own names in the stock books
of the corporation at the time fixed in the bylaws or where the bylaws are
silent at the time of the election. The said stockholder may: (a) vote such
number of shares for as many persons as there are directors to be elected; (b)
cumulate said shares and give one (1) candidate as many votes as the number
of directors to be elected multiplied by the number of shares owned; or (c)
distribute them on the same principle among as many candidates as may be
seen fit: Provided, That the total number of votes cast shall not exceed the
number of shares owned by the stockholders as shown in the books of the
corporation multiplied by the whole number of directors to be
elected: Provided, however, That no delinquent stock shall be voted. Unless
otherwise provided in the articles of incorporation or in the bylaws, members
of non-stock corporations may cast as many votes as there are trustees to be
elected by may not cast more than one (1) vote for one (1) candidate.
Nominees for directors or trustees receiving the highest number of votes shall
be declared elected.
If no election is held, or the owners of majority of the outstanding capital
stock or majority of the members entitled to vote are not present in person,
by proxy, or through remote communication or not voting in absentia at the
meeting, such meeting may be adjourned and the corporation shall proceed
in accordance with Section 25 of this Code.
The directors or trustees elected shall perform their duties as prescribed by
law, rules of good corporate governance, and bylaws of the corporation.
Election of BOD/BOT

GR - MAJORITY of the outstanding capital stock or

members must vote in person.

EXPTN. – By written proxy or

In absentia/remote communication, if authorized by
the by-laws or by BOD/BOT.

Manner of voting – may be conducted in any manner

provided in the by-laws.

In non-stock corporation – 1 member = 1 vote for every

candidate he wishes to vote.
Method of Voting
Straight voting – Every SH may vote such number of shares for
as many persons as there are directors to be elected.

Cumulative voting – Every SH is allowed to concentrate his

votes and cast it to one candidate. Under this method, a SH is
entitled to as many votes as there are number of directors to
be elected multiplied by his shareholdings.

Cumulative voting by distribution – Every SH may cumulate his

shares by multiplying also the number of his shares by the
number of directors to be elected and distribute the same
among as many candidates as he shall see fit.
 Section 24.
Corporate Officers. - Immediately after their election, the directors of a
corporation must formally organize an elect: (a) a president, who must be a
director;
(b) a treasurer, who must be a resident of the Philippines;
(c) A secretary, who must be a citizen and resident of the Philippines;
and (d) such other officers as may be provided in the bylaws.

If the corporation is vested with public interest, the board shall also elect
compliance officer. The same person may hold two (2) or more positions
concurrently, except that no one shall act as president and secretary or as
president and treasurer at the same time, unless otherwise allowed in this
Code.

The officers shall manage the corporation and perform such duties as may
be provided in the bylaws and/or as resolved by the board of directors.
 OFFICER REQUIREMENT CITIZENSHIP RESIDENCY DISQUALIFICATION

President Must be a Need not be a Need not be a Cannot be a

Director Filipino Citizen resident of the Secretary or
Phil. Treasurer at the
same time

Secretary May or may not Must be a Fil. Must be a Cannot be a

be a director Cit. resident of the President at the
Phil. same time

Treasurer May or may not Need not be a Must be a Cannot be a

be a director Fil.Cit resident of the president at the
Phil. same time

Compliance If the corporation is vested with public interest

Officer

Other Officers Qualifications provided for in the by-laws

All corporation duly organized are required to
submit to the SEC the list of elected officers as
well as their qualifications within 30 days after
the election.

-Sec. 25.
Section 26.
Disqualification of Directors, Trustees or Officers. - A person shall be disqualified from
being a director, trustee or officer of any corporation if, within five (5) years prior to
the election or appointment as such, the person was:
(a) Convicted by final judgment:
(1) Of an offense punishable by imprisonment for a period exceeding six (6)
years;
(2) For violating this Code; and
(3) For violating Republic Act No. 8799, otherwise known as "The Securities
Regulation Code";
(b) Found administratively liable for any offense involving fraudulent acts; and
(c) By a foreign court or equivalent foreign regulatory authority for acts, violations or
misconduct similar to those enumerated in paragraphs (a) and (b) above.

The foregoing is without prejudice to qualifications or other disqualifications, which

the Commission, the primary regulatory agency, or Philippine Competition
Commission may impose in its promotion of good corporate governance or as a
sanction in its administrative proceedings.
 Section 27.
Removal of Director or Trustees. - Any director or trustee of a corporation may be removed fro office
by vote of the stockholders holding or representing at least two-thirds (2/3) of the outstanding
capital stock, or in a non-stock corporation, by a vote of at least two-thirds (2/3) of the member
entitled to vote: Provided, That such removal shall take place either at a regular meeting of the
corporation or at a special meeting called for the purpose, and in either case, after previous notice to
stockholders or members of the corporation of the intention to propose such removal at the
meeting. A special meeting of the stockholders or members for the purpose of removing any director
or trustee must be called by the secretary on order of the president, or upon written demand of
stockholders representing or holding at least a majority of the outstanding capital stock, or a
majority of the members entitled to vote. If there is no secretary, or the secretary, despite demand,
fails or refuses to call the special meeting or to give notice thereof, the stockholder or member of
the corporation signing the demand may call the special meeting or to give notice thereof, the
stockholder or member of the corporation signing the demand may call for the meeting by directly
addressing the stockholders or members.

Notice of the time and place of such meeting, as well as of the intention to propose such removal,
must be given by publication or by written notice prescribed in this Code. Removal may be with or
without cause: Provided, That removal without cause may not be used to deprive minority
stockholders or members of the right representation to which they may be entitled under Section 23
of this Code.

The Commission shall, motupropio or upon verified complaint, and after due notice and hearing,
order the removal of a director or trustee elected despite the disqualification, or whose
disqualification arose or is discovered subsequent to an election. The removal of a disqualified
director shall be without prejudice to other sanctions that the Commission may impose on the board
of directors or trustees who, with knowledge of the disqualification, failed to remove such director
or trustee.
Who may remove BOD/BOT?
-SH/M with or without cause, however, removal
without cause may not be used to deprive
minority of their right to be represented.

-SEC upon verified complaint over DISQUALIFIED

director or trustee.
Requisites for Removal
1. It shall take place in a regular or special meeting
called for that purpose;
2. The special meeting must be called by the Corp.
Sec on order of the Corp Pres or upon written
demand by the SH holding majority at least
majority of outstanding stock or majority of
members entitled to vote;
3. Prior notice (meeting for removal) must have
been given to all concerned parties;
4. Vote of 2/3 of the outstanding capital stock or
members is required;
 Section 28.
(1st Part) Vacancies in the Office of Director or Trustee; Emergency
Board. - Any vacancy occurring in the board of directors or trustees
other that by removal or expiration of term may be filled by the vote
of at least a majority of the remaining directors or trustees, if still
constituting a quorum; otherwise, said vacancies must be filled by
the stockholders or members in a regular or special meeting called
for that purpose.

When the vacancy is due to term expiration, the election shall be

held no later that the day of such expiration at a meeting called for
that purpose. When the vacancy arises as a result of removal by the
stockholders or members, the election may be held on the same day
of the meeting authorizing the removal and this fact must be so
stated in the agenda and notice of said meeting. In all other cases,
the election must be held no later than forty-five (45) days from the
time the vacancy arose. A director or trustee elected to fill vacancy
shall be referred to as replacement director or trustee elected to fill
a vacancy shall be referred to as replacement director or trustee and
shall serve only for the unexpired term of the predecessor in office.
(2nd Part) However, when the vacancy prevents the remaining
directors from constuting a quorum and emergency action is required
to prevent grave, substantial, and irreparable loss or damage to the
corporation, the vacancy may be temporarily filled from among the
officers of the corporation by unanimous vote of the remaining
directors or trustees. The action by the designated director or trustee
shall be limited to the emergency action necessary, and the term shall
cease within a reasonable time form the termination of the
emergency or upon election of the replacement director or trustee,
whichever comes earlier. The corporation must notify the
Commission within three (3) days from the creation of the emergency
board, stating therein the reason for its creation.

Any directorship or trusteeship to be filled by a reason of an increase

in the number of directors or trustees shall be filled only by an
election at a regular or at a special meeting of stockholders or
members duly called for the purpose, or in the same meeting
authorizing the increase of directors or trustees if so stated in the
notice of the meeting.
In all elections to fill vacancies under this section, the procedure set
forth in Section 23 and 25 of this Code shall apply.
Who may fill vacancy/ies in the BOD

The STOCKHOLDERS or MEMBERS

1. Removal by the SH/M
2. Expiration of term
3. Increase in the number of directors/trustees due to amendment of the articles of
incorporation
4. Any other reason, if the BOD/BOT does not constitute a QUORUM for the purpose
of filling vacancy

The BOD/BOT
1. Any other reason not stated above, provided the board constitutes a quorum.
When shall vacancy/ies filled?

Reason of vacancy Period

Expiration of term Same day of such expiration at a meeting called for
the purpose
Removal by the SH/M May be on the same day of the meeting
authorizing the removal, provided such fact was
stated in the agenda and notice.
Other causes Must be held not later than 45 days from the time
the vacancy arose
Part 2
When the vacancy hinders the BOD/BOT from doing an act due
to lack of quorum and such act is necessary to prevent grave,
substantial and irreparable loss or damage to the corporation,
the vacancy may be temporarily filled from among the
CORPORATE OFFICERS by unanimous vote of the remaining
directors/trustees.

The action of the temporary director/trustee shall be limited

to the acts necessary to address the emergency.

Term of temporary director/trustee

-upon cessation of the need or upon election of the
replacement director/trustee.
Section 29.
Compensation of Directors or Trustees. - In the absence of any provision in the
bylaws fixing their compensation, the directors or trustees shall not received
any compensation in their capacity as such, except for reasonable per
diems: Provided, however, That the stockholders representing at least a
majority of the outstanding capital stock or majority of the members may
grant directors or trustees with compensation and approve the amount
thereof at a regular or special meeting.

In no case shall the total yearly compensation of directors exceed ten percent
(10%) of the net income before income tax of the corporation during the
preceding year.

Directors or trustees shall not participate in the determination of their own

per diems or compensation.

Corporations vested with public interest shall submit to their shareholders

and the Commission, an annual report of the total compensation of each of
their directors or trustees.
Section 30.
Liability of Directors, Trustees or Officers. - Directors or trustees who
willfully and knowingly vote for or assent to patently unlawful acts of
the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such directors or
trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members
and other persons.

A director, trustee or officer shall not attempt to acquire, or any

interest adverse to the corporation in respect of any matter which
has been reposed in them in confidence, and upon which, equity
imposes a disability upon themselves to deal in their own behalf;
otherwise, the said director, trustee or officer shall be liable as a
trustee for the corporation and must account for the profits which
otherwise would have accrued to the corporation.
Any director or trustee found guilty of gross negligence
or bad faith in directing the affairs of the corporation,
which yields to damage or injury upon the corporation or
SH/M shall be held PERSONALLY liable for such act.

Doctrine of corporate opportunity

-the director acquiring business opportunity that should
belong to the corporation, must account to the
corporation for all the profits he obtained unless his act
was ratified by the stockholders representing at least
two-thirds of the outstanding capital stock. (Sec. 33)
Section 31.
Dealings of Directors, Trustees or Officers with the Corporation. - A contract of the
corporation with one (1) or more of its directors, trustees, officers or their spouses and
relatives within the fourth civil degree of consanguinity or affinity is voidable, at the
option of such corporation, unless all the following conditions are present:
(a) The presence of such director or trustee in the board meeting in which the contract
was approved was not necessary to constitute a quorum for such meeting;
(b) The vote of such director or trustee was not necessary for the approval of the
contract;
(c) The contract is fair and reasonable under the circumstances;
(d) In case of corporations vested with public interest, material contracts are approved
by at least a majority of the independent directors voting to approved the material
contract; and
(e) In case of an officer, the contract has been previously authorized by the board of
directors.

Where any of the first three (3) conditions set forth in the preceding paragraph is absent,
in the case of a contract with a director or trustee, such contract may be ratified by the
vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital
stock or of at least two-thirds (2/3) of the members in a meeting called for the
purpose: Provided, That full disclosure of the adverse interest of the directors or trustees
involved is made at such meeting and the contract is fair and reasonable under the
circumstances.
Self-dealing director/trustee
A contract entered into by the corporation with one or more of its D/T,
officers or their spouses and relatives within the 4th civil degree of
consanguinity or affinity is voidable, unless:
1. The presence and vote of such D/T in the meeting where such
contract was entered, is not necessary to constitute a quorum and
approval of the contract;
2. The contract is fair and reasonable;
3. In case of Corporations vested with public interest, contract must
be approved by 2/3 of the entire BOD with at least majority of the
independent directors;
4. In case of an officer, the contract must have been previously
authorized by the BOD/BOT.

In the absence of 1 and 2, it must be ratified by the vote of 2/3 of the

outstanding capital stock/members, with full disclosure of the adverse
interest of the self-dealing D/T
Section 32.
Contracts Between Corporations with Interlocking
Directors. - Except in cases of fraud, and provided the
contract is fair and reasonable under the circumstances a
contract between two (2) or more corporations having
interlocking directors shall not be invalidated on that
ground alone: Provided, That if the interest of the
interlocking director in one (1) corporation is substantial
and the interest in the other corporation or corporations
is merely nominal, the contract shall be subject to the
provisions of the preceding section insofar as the latter
corporation or corporations are concerned.

Stockholding exceeding twenty percent (20%) of the

outstanding capital stock shall be considered substantial
for purposes of interlocking directors.
Interlocking Directors – Members of the BOD in one
corporation are also members of the BOD of another
corporation.

GR - Contract between corporations with

Interlocking directors shall be valid provided such
contracts were fair and reasonable and not
fraudulent.

EXPTN. – If the interlocking directors has

SUBSTANTIAL interest with one and NOMINAL in the
other, Sec. 31 shall apply.

Substantial interest shall mean stockholdings

exceeding 20% of the outstanding capital stock.
Section 33.
Disloyalty of a Director. - Where a director, by virtue
of such office, acquires a business opportunity
which should belong to the corporation, thereby
obtaining profits to the prejudice of such
corporation, the director must account for and
refund to the latter all such profits, unless the act
has been ratified by a vote of the stockholders
owning or representing at least two-thirds (2/3) of
the outstanding capital stock. This provision shall be
applicable, notwithstanding the fact that the
director risked one's own funds in the venture.
Section 34.
Executive Management, and Other Special Committees. - If the
bylaws so provide, the board may create an executive committee
composed of at least three (3) directors. Said committee may act, by
majority of vote of all its members, on such specific matters within
the competence of the board, as may be delegated to it in the bylaws
or by majority vote of the board, except with respect to the: (a)
approval of any action for which shareholders' approval is also
required; (b) filing of vacancies in the board; (c) amendment or
repeal of bylaws or the adoption of new bylaws; (d) amendment or
repeal of any resolution the board which by its express term is not
amendable or repealable; and (e) distribution of cash divedends to
the shareholders.

The board of directors may create special committees of temporary

or permanent nature and determine the members' term,
composition, compensation, powers, and responsibilities.